AtriCure primed for FDA approval

AtriCure Inc. is closing in on a U.S. Food and Drug Administration approval that could set the West Chester-based medical device maker apart from its competition – and possibly tee the company up for a sale.

An FDA advisory panel recently recommended that AtriCure’s Synergy Ablation System be approved for treatment of atrial fibrillation, in which the heart’s two small upper chambers flutter instead of beating.

The FDA, which usually follows advisory panel recommendations, is expected to announce a final decision in the first quarter of 2012. Approval would be a marketing coup for AtriCure, positioning its surgical system as the only one on the market that could make such a claim.

“This would be monumental – a seminal event for us,” said Julie Piton, chief financial officer for AtriCure. “It would help us to accelerate adoption.”

In fact, the approval could make the company an attractive acquisition target, analysts said.

At the moment, the AtriCure system has FDA approval only for cardiac tissue removal or ablation, not for treatment of any particular disease. It puts AtriCure in a straitjacket when talking about the system, unable to discuss atrial fibrillation in its marketing or in training programs for doctors.

“I’m sure they’ve got the promotional stuff prepared for their website and are ready to turn it on,” said John Lewis, chief operating officer of BioOhio, a nonprofit booster group for the state’s technology industry.

AtriCure’s system, which uses radio frequency energy to destroy tissue, includes clamps, a radiofrequency generator and related switchbox.

The 200-employee AtriCure, which posted total revenue last year of $59 million, received European Union approval to market the system for atrial fibrillation in 2006.

David Drachman, CEO of the company, said an approval would “mark a new era of expansion and growth for AtriCure.”

The day after the AtriCure recommendation, the FDA panel recommended against atrial fibrillation approval for a catheter-based device by Medtronic Inc., a competing, Minneapolis-based firm, saying that its safety risks might outweigh its benefits.

Atrial fibrillation, which affects 2 million people in the United States, can lead to problems such as congestive heart failure and stroke. It’s often linked to typical cardiac risk factors such as hypertension and diabetes.

Success in this case could be pivotal for AtriCure, said Matthew Dolan, a senior research analyst at Roth Capital Partners, an investment-banking firm based in Newport Beach, Calif.

“The perception out there is that what they’ve accomplished with the FDA would be one of the variables that would attract an acquirer,” he said. “Within the next 12 to 18 months, that’s a real possibility.”

Dolan rates the stock, which closed at $10.14 on Nov. 30 following a 52-week range of $8.44 to $14.84, as a “buy.” Current weakness is in large part because of overall market conditions, he said.

AtriCure started in 2000 and went public five years later via a $50 million IPO. The company is looking to raise money, with plans to present at several venture capital events over the next two months.

For patients with persistent cases of atrial fibrillation, the approval that AtriCure is seeking would cover use of its system during open-heart surgery for other problems.

Piton said the system targets a $250 million opportunity in the United States, most of which is untapped. AtriCure generated $29 million in open-heart revenue last year, about 45 percent of the existing market.

U.S. surgeons who treat atrial fibrillation with the AtriCure system at present must use it “off-label.”

“If there are no approved devices, you use what’s available,” said Venkat Rajan, a research analyst specializing in medical devices for Frost & Sullivan, a research and consulting firm based in Palo Alto, Calif. “If there’s a system out there with a specific atrial fibrillation indication, then to mitigate risks on your part, you would prefer that.”